You may have had an Irrevocable Living Trust drafted to strategically gift your assets with some added protection and tax benefits. Still, that trust won’t accomplish your objectives unless you fund it promptly while alive. Depending on the type and purpose of your trust, you may have several considerations involving the timing of asset transfer. Do you know the funding status of your Irrevocable Living Trusts? Do you have a plan to transfer specific assets to them?
The shocking fact is that most people who work with estate planning attorneys to draft trusts do not know where they stand regarding the next steps. Learn what is involved in funding Irrevocable Living Trusts. You can also schedule a free virtual Funding Analysis to determine the remaining outstanding tasks to complete the funding of your trusts according to your wishes. At TrustFunding.com, we want to take your Irrevocable Living Trust strategy past the finish line so it counts for your assets and your beneficiaries.
An Irrevocable Living Trust is created and goes into effect when you fund it while you are alive. It is an Irrevocable Trust because it is challenging or impossible to cancel your decision once you place an asset into the trust. At that point, the terms you drafted will apply to such assets. The resulting Irrevocable Trust Fund is then managed by the Trustee for the benefit of the beneficiaries, according to the terms of the trust.
You can contrast an Irrevocable Living Trust with a Testamentary Trust, which is also irrevocable. The difference is that a Testamentary Trust goes into effect once the Grantor dies, despite being made while the Grantor is still living. A Revocable Living Trust is created and goes into effect while you are alive but allows for modification or cancellation and keeps the assets in your estate.
Your trust does nothing if you don’t place any assets into it. You have to fund it to serve the purpose(s) for which you drafted it.
Irrevocable Living Trusts have two primary purposes:
Additional concerns that influence these strategies include qualifying for benefits (as in the case of Elder Planning, Disabled Beneficiaries, and Medicaid Qualification) and otherwise protecting beneficiaries (as in the case of a spendthrift clause for minor beneficiaries to prevent squandering).
Dozens of Irrevocable Living Trusts may be strategically drafted and funded to benefit a variety of people according to the terms of the trust chosen by the Grantor. Spouses, children, friends, charitable foundations, or even oneself may benefit from an irrevocable trust that goes into effect during the Grantor’s lifetime. Still, some rules often come into play for each type.
Some types of Irrevocable Living Trusts oriented toward tax reduction include:
Some Irrevocable Living Trusts that can protect property include:
Different types of beneficiaries may benefit from the distribution of assets immediately, gradually, or eventually—depending on the type of Irrevocable Living Trust and as terms are met. Strategies involving trusts can be very diverse in their approaches.
For example, they may incorporate:
Likewise, the ways you will need to approach the transfer of assets to fund your trusts will vary according to the type of trust, your unique circumstances, and your overall strategy. TrustFunding.com manages the optimized funding of trusts in all 50 states according to individual plans for our clients’ assets and beneficiaries.
Understand that if you place an asset into your Irrevocable Living Trust, you lose control of that asset. That is the tradeoff for being able to discount it from your estate. Different types of Irrevocable Trusts have different purposes and strategies. The Grantor must decide whether losing access to a given asset is worth the tax, estate, or protection benefits expected from transferring that asset to fund the trust.
Another downside to Irrevocable Living Trusts is that they are inflexible concerning changes among relevant people or situations that may occur after you draft the trust or transfer assets into the trust. This scenario can utilize assets differently than you may envision or intend.
For example, you may have drafted the trust with specific beneficiaries and purposes. However, the chain of contingent beneficiaries due to births or deaths may result in the assets going to different people than you intended. Alternatively, a falling out may result in a beneficiary receiving the assets and then using them for other purposes than expected. Sometimes, you can use the terms of the trust to anticipate and prevent such developments.
Funding your Irrevocable Living Trust is the most crucial step of your trust strategy:
Much thought and effort go into drafting trusts as components of your overall financial planning and estate strategy. Irrevocable Living Trusts allow you, the Grantor, to protect assets, reduce estate, and/or avoid taxes. They will only serve these intended purposes if you fund the trust(s) in question during your lifetime. Failing to do so can make most of that thoughtful planning a wasted effort.
Even if you have drafted one or more Irrevocable Living Trusts, a trust only really exists once it is funded. If you don’t fund it while alive, it does not go into effect and would, therefore, not be a living trust. You or your beneficiaries would then not enjoy the intended outcomes of the trust. The drafted trust is only a plan, and you must take the appropriate actions to follow through on that plan. That’s where TrustFunding.com comes in.
At TrustFunding.com, we fund our clients’ trusts. Verify your asset transfer strategy and follow through on funding your trusts by calling us today at (248) 987-0400 or filling out the form on our website to schedule a free, virtual face-to-face Funding Analysis. We want to take your trust across the finish line so it will work for you.
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The information in this blog post (“post”) is provided for general informational purposes only and may not reflect the current law in your jurisdiction. No information in this post should be construed as legal advice from the individual author or the law firm, nor is it intended to be a substitute for legal counsel on any subject matter. No reader of this post should act or refrain from acting based on any information included in or accessible through this post without seeking the appropriate legal or other professional advice on the particular facts and circumstances at issue from a lawyer licensed in the recipient’s state, country, or other appropriate licensing jurisdiction.
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The information in this video is provided for general informational purposes only and may not reflect the current law in your jurisdiction. No information in this post should be construed as legal advice from the individual author or the law firm, nor is it intended to be a substitute for legal counsel on any subject matter. No reader of this post should act or refrain from acting based on any information included in or accessible through this post without seeking the appropriate legal or other professional advice on the particular facts and circumstances at issue from a lawyer licensed in the recipient’s state, country, or other appropriate licensing jurisdiction.